Which of the Following Statements Is FALSE

question 52

Multiple Choice

Which of the following statements is FALSE?

• A) Without trading, the portfolio weights will decrease for the shares in the portfolio whose returns are above the overall portfolio return.
• B) Portfolio weights add up to 1 so that they represent the way we have divided our money between the different individual investments in the portfolio.
• C) A portfolio weight is the fraction of the total investment in the portfolio held in an individual investment in the portfolio.
• D) The expected return of a portfolio is simply the weighted average of the expected returns of the investments within the portfolio.

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Definitions:

Desired Rate of Return

The minimum expected yield by investors for their investment, reflecting the risk level and opportunity cost.

Initial Investment

The amount of money put into a project or investment at the beginning, before any returns are realized.

Inflation

A period when prices in general are rising and the purchasing power of money is declining.

Time Value of Money

The concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.